When Is a Pipeline in the Public Interest?

Yolanda Carmona’s job is to market Van Horn to the rest of the world. It comes naturally to her. She grew up visiting family in the small West Texas town, a stop on Interstate 10 between Fort Stockton and El Paso that most travelers know, if they know it at all, as a place to fill your car with gas and your stomach with good Mexican food. She takes pride in—and feels protective of—the hamlet and the surrounding stretch of desert where her family has been raising cattle for a century.

As the events and tourism director at the local convention center and visitors bureau, Carmona is plugged into the goings-on in the town of fewer than two thousand inhabitants. So when she learned last summer that an out-of-state energy company had plans to route a huge natural gas pipeline about a mile south of its main intersection, she was shocked. “Nobody in town knew, period,” she said. Local officials weren’t briefed. “They don’t know anything. And I know this for a fact because they come to me and ask me for information on what is happening with the pipeline. I even have our mayor coming in the office and saying, ‘Yolanda, what’s new? What’s updated on the pipeline?’ ” 

Carmona had hoped to travel to Washington, D.C., earlier this year to speak with federal regulators but couldn’t afford the trip. No one from Van Horn went. By then the Texas Railroad Commission, the body responsible for the intrastate portion of the pipeline, had already signed off on it. And in February the Federal Energy Regulatory Commission (FERC) approved the segment that would cross the border into Mexico. All that remains is for the companies involved in the project to decide to move ahead, and those decisions could come as early as this summer. 

If built, the Saguaro Connector Pipeline would be a giant in just about every sense of the word. It would begin at a gas-collection hub north of Fort Stockton and head west by southwest, past Van Horn, for 155 miles until it crosses the Rio Grande. Starting at the border, another pipeline, named Sierra Madre, would continue for about 500 miles until it arrives at Puerto Libertad, on the eastern coast of the Gulf of California. There the gas would be cooled, to liquefy and compress it, and then loaded onto tankers bound for countries that could include Chile, China, and Japan.

The steel pipeline would measure four feet in diameter (large enough to drive a go-kart through) and would rank among the six largest of Texas’s more than 4,500 gas transmission pipelines. It is designed to carry 2.8 billion cubic feet of gas daily. That’s enough to power about 30 percent of Texas’s electric grid—around the clock, every day, all year.

Given the size of Van Horn and its remoteness—two hours by car from the nearest major city—the prospect of a large gas pipeline passing nearby is frightening, said Carmona. The town is not prepared for everything that might go wrong, such as an explosion. Fatalities involving gas transmission pipelines are rare, but not unheard of. Seven deaths have been reported in Texas over the past decade. “We have two ambulances,” she said. “Something involving five people—that would be disastrous.” A spokeswoman for Oneok, the Tulsa-based company that would build the Saguaro pipeline, said the company communicates with community members and carries out inspections for safety. Federal rules require pipeline operators to perform extra safety checks near homes.

Federal and state governments facilitate the construction of energy pipelines if they’re deemed to be in the public interest. But the process of weighing the costs and benefits to various parties can be slippery. For Carmona and other residents of Van Horn—nearly 80 percent of whom are Hispanic, and whose median incomes are half as much as those in the rest of Texas—is it in their interest for a 48-inch pipeline carrying flammable gas to be routed next to their town when some of the biggest beneficiaries would be out-of-state investors and overseas consumers? Are those risks to a few small towns outweighed by the benefits to Texas gas producers and their employees? By the geopolitical alliances built or possible benefits to the global environment if U.S. gas exports encourage Asian power plants to burn less coal? Nobody in authority seems to be addressing these trade-offs. “For a project of this size and with such obvious international implications, we need to be asking these questions,” said Felix Mormann, a professor who teaches energy law at Texas A&M University. “In an ideal world, Texas would ask these questions.”

A Global Route for Texas Gas

If built, the Saguaro Connector Pipeline would travel 155 miles through West Texas until it reaches Mexico, where another pipeline would carry gas to the Gulf of California, for export overseas.

Though its effects may be felt in Van Horn, the Saguaro pipeline was set in motion by forces far away. Its creation began, arguably, in Panama. The Central American nation didn’t see much rain last year—the first domino to fall in a chain of events disrupting global trade routes. October is generally the height of the country’s wet season, but that month in 2023 was the driest in Panama’s recorded history. As a result, Gatún Lake didn’t fill up as much as usual. The lake is an indispensable link in global trade; it forms a major part of the Panama Canal, which allows ships to pass between the Atlantic and Pacific oceans.

Low water levels in the lake forced the canal to temporarily limit traffic. From the winter of last year until mid-April, only some 20 ships could cross between oceans daily via the canal, compared with the usual 32. Some ships were forced to wait weeks for their turn, at great cost to the owners of their cargoes. “We are living through challenging times,” Panama Canal administrator Ricaurte Vásquez Morales said in late December. Earlier in the year the Panama Canal Authority blamed its problems on “the accelerating implications of climate change.”

The increasing unpredictability of transit times through the canal has created interest in a more reliable route for U.S. natural gas to reach Asia. Most gas for export currently travels through pipelines to ports on the Gulf of Mexico near the Texas-Louisiana border. The distance to markets can vary enormously depending on the route. From the Gulf Coast to Shanghai, via the Panama Canal, is 11,500 miles. An alternative route around Africa measures 17,200 miles and can add roughly a week to the trip. 

The shortest sea route is from the proposed Mexican port at the end of the Texas-to-Sonora pipeline: roughly 8,000 miles. Mexico Pacific Limited, the Houston-based company behind this export plan, touted this fact when it applied to the U.S. government for a license to ship the gas. On a world map, the company placed a giant red “X” over Central America. “Avoids the Panama Canal,” it noted. It also claims that exporting Permian Basin gas by pipeline to Mexico and then by ship lowers greenhouse gas emissions by a third when compared with shipping through the canal.

As far as global commerce goes, the new pipeline solves one problem. Back in Texas, it raises another: exporting that much gas is a gamble at a time when electricity demand is rising. More energy-hungry data centers and factories are being built, and they need electricity that could be generated by gas. Lieutenant Governor Dan Patrick has called for the construction of more gas-fired power plants, arguing that they are needed to shore up Texas’s grid, which has become more reliant on intermittent sources of electricity such as solar panels and wind turbines. 

Steven Aranyi, a spokesman for Patrick, said his boss was not concerned that exporting so much gas could drive up the price of gas for power generation. Patrick “knows we have plenty of natural gas for the present and future for the grid and for exports,” Aranyi said in an email. Dean Foreman, the chief economist of the Texas Oil and Gas Association, a trade group representing the state’s producers, agrees. “There really is no direct connection, nothing significant or lasting, between domestic natural gas prices and exporting natural gas,” he said on a podcast in March. He also pointed out that earlier this year there was so much gas in West Texas, relative to pipelines and storage capacity, that prices went negative—producers had to pay pipelines to accept natural gas. 

Indeed, natural gas prices have been at inflation-adjusted record lows recently. But building larger connections between the U.S. and overseas markets means that when we export gas, we may be importing global price volatility. Texas gas utilities will be competing for resources with petrochemical plants in China. When the next geopolitical energy shock occurs, Texans could feel the reverberations in their monthly electric bills. (This happened in 2022 when Russia invaded Ukraine and then shut off some of the country’s pipelines to Europe.)

Currently, Patrick and the fossil fuel lobby are correct—natural gas supplies are plentiful. But making long-term decisions based on short-term price signals is reckless. Cy McGeady, a fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies, based in Washington, D.C., said that it’s clear that rising exports have not raised gas prices over the past few years. But he is worried about the future. What happens when flat gas supplies and rising electricity demand meet a doubling of exports? McGeady says this is “creating the risk—a decade or two down the road—of there being a real supply crunch.” The best way to avoid this outcome is a federal energy policy that promotes more nuclear and renewable energy, freeing up more gas for export. That would require coordination between Congress and the U.S. Department of Energy. It would take, he says, “a long-term, coherent energy strategy and policymaking that just really isn’t under consideration by either side of the aisle [in Congress] currently.”

When Oneok (pronounced “One Oak”) sought permits from Texas officials, it wasn’t required to offer any analysis of the impact on prices. Railroad Commission spokeswoman Patty Ramon said the bureaucracy doesn’t ask much of pipeline companies. “It is an informational registration,” she said. The permit was a one-page letter with an attached electronic map. The application is so informal and perfunctory that Oneok forgot to include one of the few required pieces of information: the length of the pipeline in miles. Three weeks later, it filed an addendum. “In error, the mileage was left off the original,” the letter read. Four days later the state issued a one-page approval letter.

Oneok might be forgiven for its sloppy paperwork, because it really doesn’t matter. Pipelines that run only in Texas—there are thousands of them—are of little concern to the Railroad Commission until they are built. State inspectors worry about leaks and safety, but the state takes no interest in the routing of pipelines. State law grants pipeline companies the right of eminent domain, meaning they can build on any private property they choose, if the project is deemed to be in the public interest. They must pay fair market value to property owners, who can argue over that price, including in court. The property owners can sometimes persuade companies to select different routes that pose less risk. But they can’t block the pipelines. 

The U.S. government handles things quite differently. FERC requires applicants to file proposed and alternative routes, and decides the final path. But the Saguaro, though it would carry gas into Mexico, is considered an intrastate pipeline because it doesn’t pass through other states—and thus falls under Texas jurisdiction.

If Oneok and Mexico Pacific decide that business conditions are favorable and press ahead with the project, the regulatory path is already clear. The Railroad Commission paperwork was completed in January 2023. By that time, Mexico Pacific had already received an export license from the U.S. government. The U.S. Department of Energy said the law required that all exports to countries with which the U.S. has a free trade agreement be “deemed consistent with the public interest and granted without modification or delay.” The federal government took three months to approve the license.

By the spring of 2023, all that stood in the way of the 655-mile project was a green light for the one-thousand-foot segment that would cross the Rio Grande, south of Sierra Blanca in rural West Texas. Any energy facility that crosses an international border requires approval from FERC, along with a sign-off from the U.S. State Department. In early November an official of the State Department said it needed to see a rigorous analysis of greenhouse gas emissions from the West Texas oil fields all the way through Asian power plants before giving its okay. FERC had looked only at emissions that would result from the roughly quarter-mile border crossing.

The State Department wanted to know if the Saguaro pipeline would accelerate or decelerate climate change—the very problem experts say sapped rainfall in Panama, creating the need for new modes of export. But the answer is not a simple one. If Permian Basin gas were to be burned in power plants in China instead of coal, that would be better for the environment. But along the way, you need to consider other factors, including how much gas would leak, both from pipelines and from ships. 

FERC replied that the request was “beyond the scope of the Commission’s analysis” and Oneok agreed. Then, two weeks after one office in the State Department threatened to derail the pipeline, another office in the department recommended pushing it through. It offered no explanation for this reversal.

This caught Tyson Slocum’s attention. As director of the energy program at Public Citizen, a consumer rights advocacy group, Slocum is tasked with scrutinizing governmental actions for this kind of unexplained change of heart. He wrote a letter to the U.S. secretary of state asking for an explanation. In response, the State Department cited a draft environmental assessment—shorter and less detailed than a full assessment—commissioned by Mexico Pacific and issued a day before the approval. The department also said its view was that the new pipeline would help lower venting and flaring of natural gas in West Texas. It offered no thorough analysis, as far as Slocum is concerned, to back up this assertion.

“I have never seen an agency in the course of less than a month go from, ‘Hey, we need to see a full greenhouse-gas-emission life cycle analysis,’ to ‘Never mind what we said three weeks ago; we sign off on the project,’ ” Slocum told me. “That they would perform this shoddy and slapdash of an analysis was a little shocking to me. . . . This is not some minor infrastructure project.”

Despite protests from environmental groups, in mid-February the federal government granted a border-crossing permit for Oneok’s Saguaro pipeline, removing the last major hurdle. 

A couple of weeks before the final federal approval, the White House issued a pause on new liquefied natural gas export permits. It said the analyses used to gauge the impact of gas exports on domestic prices and greenhouse gas emissions were five years old and needed to be updated. Saguaro’s permit to export gas was already approved (even though the approval to build the border-crossing facility wasn’t) and won’t be affected, a Oneok spokesman said. Texas Oil and Gas Association president Todd Staples called the pause “reckless” and “a major mistake that puts American jobs and allies at risk.” 

There has never been a thorough examination of all of the Saguaro pipeline’s costs and benefits. The energy world is moving at a breakneck pace right now, and it is hard to parse and balance all the positive and negative impacts of the pipeline on natural gas prices, jobs, climate change, and foreign trade—not to mention the effect on communities along the pipeline’s route, such as Van Horn. Neither the state nor federal government nor the commercial interests involved appeared to have even tried to advance an argument for the pipeline based on a balancing of impacts and interests. “What’s their justification? They don’t have any. There’s nothing,” Doug Hayes, a senior attorney with the Sierra Club, which has opposed the project, told me.

Exporting more natural gas may well offer real benefits for the climate as well as for gas-production companies and their workers. It would almost certainly offer benefits to the companies promoting the Saguaro pipeline and other export projects. But it may be costly to export so much raw energy, instead of keeping prices relatively low in Texas to the benefit of every business and consumer that uses electricity. One big question yet to be answered is this: Netting out all the pros and cons of the pipeline, is it good for Texas and Texans?  

Disclosure: Texas Monthly’s chairman is also chairman of the managing partner of Enterprise Products Partners L.P., a midstream energy company with interests that include pipelines and storage facilities.

This article originally appeared in the June 2024 issue of Texas Monthly with the headline “When Is a Pipeline in the Public Interest?” Subscribe today.